In the last couple of weeks we have seen quite a move in both Equities and Bonds. We had our first pullback of the year in equities, with the S&P dropping 5.76% from its peak in May, only to be followed with a revival of the S&P, to new highs as of yesterday. Click for a larger image
In bonds, there has been a major re-pricing based upon the Fed removing or slowing down stimuli. The ten year treasury went from a yield of 1.7% all the way up to over 2.7%, which is an incredibly big move for bonds.
It is time to get down to fundamentals and what really moves the markets, earnings. This season will be particularly interesting as many companies have guided lower towards lower earnings. If this comes to fruition, we will most likely pull back again as we are currently trading at 15.5 times earnings which we consider to be ahead of a slow growing economy. Companies reporting have mostly beaten expectations but we have a lot more earnings reports coming out in the next few weeks which will guide the markets from here.